Working out VAT

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can someone give me advice.<BR>When i work out VAT on the gross amount i divide by 47 and times by 7 why do we use 47 & 7? I think it is something to do with fractions but am not sure.<BR>Could someone explain, dont mind how much detail you need to go into.<BR><BR>Much appreciated

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    do you by any chance go to lambeth college ?? as i heard a lecturer there was teaching this method.<BR><BR>its actually a waste of time to learn this method because say VAT was to change to 18% or 17% then how would you calculate it ??<BR><BR>VAT is easy just simple math<BR><BR>amount eg 50 divide by 100 gives you 1% and then multiply by X to give you X amount as a percentage (in this case 17.5%) and hey presto<BR><BR>example<BR>item cost £50 plus vat how much is the grand total <BR><BR>item cost £50 plus vat which is the same as £50+17.5% (17.5% aka VAT)=£57.50<BR><BR>see workin below<BR><BR><BR>50/100x17.5=0.5x17.5=8.75 <BR><BR>i assume u are doing foundation i think it would be more beneficial to post in the foundation forum as this is the technician forum and you probably wont get a reply in the future.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    Sorry to bang your theory out of the window, but if i buy goods at a cost of £50.00 net of VAT i would expect to pay a gross balance of £58.75, which means that i have paid £8.75 in VAT........<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    Dont give blank a hard time - its only a typo - the maths is sound just the fingers in the wrong place. Lots of people including Customs & Excise use the VAT fraction - personally i just have a posh calculator and put the % in and then press tax (VAT) + or - depending on whether i want to gross up or net down!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    Hi<BR><BR>The 40/7 thing is used as 17.5% of 40 is exactly 7. I have heard of accountants in practices actually using this. The company accountants for my last company were a medium/'larger' firm and they used to put various fractions for different taxes on their website.<BR><BR>Neil
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    I have to say that I use 7/47 most of the time as when you are doing lots of VAT calculations then it is quicker than putting in 17.5 or 100 or 117.5. No doubt if they change the VAT rate I'll have to find the new fraction. I can use the percentage way (as I'm sure most accountants can) it's just for speed that I use the fraction.<BR><BR>Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Working out VAT

    yeah alternativly you could just multiply by 0.175 but i thought i would give you a break down<BR><BR>eg 25 x 0.175 = 4.375 (round down for VAT) thus 4.37<BR><BR>the 7/47 is the same as 50/117.5 x 17.5<BR><BR>so i think the question must be if the total is 50 including VAT how would i find out the amount of VAT and yes you could do<BR><BR>7/47 x 50 = 7.44 odd<BR>or<BR>50/117.5 x 17.5 = 7.44 odd<BR>alternatively (50 x 17.5)/117.5<BR><BR>thats the maths for today tomorrow quadratic equations.<BR><BR>in regards to using it because its quicker yeah i understand that but as long as people know how it works and how to process different % eg cap gains 10% etc then theres no prob use whatever you like<BR><BR>and to bluebird you should be trying to help rather than trying to slag me off and what theory of mine have you banged out of the window !!

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